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New HP CEO Ready To Mount Software Offensive

Leo Apotheker says software is the key to getting the world's largest IT company to add up to more than the sum of its parts.

New Hewlett-Packard CEO Leo Apotheker Friday left little doubt that he will use his 20 years of experience at German software giant SAP to push the world's largest IT company deeper into the software market.

In his first conference call with Wall Street analysts since being named to the post 16 hours earlier, Apotheker said he believes that HP should be more "valuable than the sum of its parts" and "software is sort of the glue to make that happen. Software [allows us to] differentiate on our industry standard platform. Software can make sure that various parts of our technology actually fit well together." He also pointed to "higher-value-added services" as an "increasingly important element and component of the strategy as well."

"HP is grounded in the hardware business," said Apoktheker, who stepped aside as CEO of SAP in February after less than a year in the wake of an SAP revenue slide. "There are few companies, if any on the planet, that could even come close to HP's capability when it comes to hardware. I bring to the stable an asset that HP is less grounded in, even though it is a great company in that business as well, that is software and to a certain extent high-added-value services. I plan to bring that personal value to HP."

NEXT: A Higher-Margin Business

The stepped-up push into the software business would provide much higher margins than the PC, server and printing business that makes up the lion's share of HP's $123 billion in sales. HP has a lot of room for improvement in the software business: Software revenue was essentially flat for the nine-month period ended July 31 at $2.61 billion, accounting for only 3 percent of HP's $92.75 billion in total sales for the period.

Apotheker's comments signal that HP is going to compete more aggressively with Oracle, which hired former HP CEO Mark Hurd last month. It also opens the door for HP to form a tighter strategic partnership with or possibly acquire Apotheker's former employer, SAP.

If HP does go into a head-to-head software battle against Oracle, it has additional software executive talent with the appointment Thursday of Ray Lane, Oracle's former president and chief operating officer, as non executive chairman and a new member of the board of directors. Both Apotheker and Lane's appointment are effective Nov. 1.

When asked if HP will follow Oracle's lead by providing an integrated hardware-software stack, Apotheker refused to comment specifically on Oracle's strategy. But he did indicate that HP would move to put a full panoply of technology "all together into a cohesive strategy" for customers.

NEXT: Massive Disruption In The Technology Stack

"We see that there is massive disruption happening around all of the value chain and all of the components of the technology stack," said Apotheker. "We believe at HP that there is great opportunity for us. We have the capability. We have the skill set. We have the know-how. We have the strength. We have the R&D capability. We have the talent in-house to be an effective driver of not only each layer of the technology stack and the changes, but also to put it all together into a cohesive strategy for our customers and clients worldwide. That is what we are going to focus on. I am sure Oracle will focus on their own strategy as well."

Apotheker refused to single out specific software technology areas that HP would increase its investment in such as databases, other applications or middleware.

"HP has such a diversified mix of businesses and products and services that I believe that we are uniquely positioned to be a strong player in every part of the stack. It is a little bit early for me and it would be somewhat presumptuous to say which exact part of which element we are good or better at."

Apotheker said his experience will pave the way for HP to create a "broader portfolio" of solutions to customers. What's more, he said, his international and global experience will help the company grow in emerging markets.

"HP is a global company," said Apotheker, who speaks multiple languages. "One of the attributes I have is I am a global citizen. Speaking a few languages always helps. I have been doing business globally for the last 20 years now."

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